Chapter 4 Assessing the Financial Performance and Returns of Ethanol Production: A Case Study Analysis Paul N. Ellinger 5

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1 Chapter 4 Assessing the Financial Performance and Returns of Ethanol Production: A Case Study Analysis Paul N. Ellinger 5 This primary objective of this case study is to illustrate the factors that impact the shortand long-run profitability and financial performance of constructing and operating a dry mill ethanol plant in east central Illinois. The sub-objectives are to illustrate an economic framework to measure risks and returns for equity and debt capital providers and to provide an analysis tool to monitor the economics of investing in a dry mill ethanol plant. Case Study Description This case study explores the financial risks and returns of a hypothetical dry mill ethanol plant in Champaign County, Illinois. The natural gas powered ethanol plant will produce 100 million gallons per year. The plant will produce 2.8 gallons of anhydrous ethanol and 18 pounds of distillers grain per bushel of corn. Due to limited marketing opportunities in the Midwest, this analysis does not include capturing carbon-dioxide as an output. The plant will be organized as a special purpose Illinois Limited Liability Company created for the construction and operation of an ethanol facility. The project will be financed by a term loan (50%) and equity financing (50%). The plant will be built under a fixed price turnkey engineering, procurement and construction contract (EPC) that includes performance and schedule guarantees and uses proven technology from Delta-T Corporation and T.E. Ibberson. The plant will be in full operation 18 months after contract initiation. The following sections review the financial performance of existing players, local availability of corn, capital requirements, operational budgets, and financial pro-forma statements for the hypothetical plant. Financial Performance of Publicly Traded Firms The largest producer of ethanol is Archer Daniels Midland (ADM) with an estimated production capacity of 1.2 billion gallons and expansion plans of 550 million gallon through The estimated market share for ADM is 24%. The next largest players are VeraSun Energy Corporation (VSE) and U.S. Bioenergy Corporation (USBE) with an approximate 4% share of capacity each. Aventine Renewable Energy (AVR), Pacific Ethanol (PEIX) are also publicly traded pure ethanol producers. MGP Ingredients (MGPI) and Andersons Inc (ANDE) are other major publicly traded ethanol producers that are diversified across other revenue sources. The remaining participants are primarily farmer owned plants or limited liability corporations. The farmer-owned proportions of current capacity of ethanol production and plants under construction are 28% and 12%, respectively (Renewable Fuels Association). 5 Professor, Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign. 37

2 Some evidence of investor sentiment of ethanol production can be observed through the profitability and stock price performance of public firms competing in the ethanol industry. The size and financial performance of the publicly traded firms participating in the ethanol production are provided in Table 1. The investor returns for 2006 were extremely high, ranging from 31% for ADM to 98% for the ANDE. However, year-to-date stock price changes for 2007 are negative for 5 of the 7 firms (Moneycentral.com, October 26, 2007). Bank of America downgraded four ethanol producers, giving three (VSE, PEIX, AVR) sell ratings on concerns that margins may decline 70% by 2009 (Dow Jones Market Watch, May 31, 2007). Table 1. Publicly Traded Firms in Ethanol Production Publicly Traded Firms in Ethanol Production 10/26/ Price Current YTD Return Jan-07 Price Change Market Cap Archer Daniels Midland Company 31% % 22,484,734,313 VeraSun Energy Corporation NA % 973,551,798 US Bioenergy Corporation NA % 434,968,006 Aventine Renewable Energy Holdings, Inc. NA % 417,217,124 Pacific Ethanol Inc 42% % 312,875,502 MGP Ingredients, Inc. 93% % 146,363,097 The Andersons, Inc. 98% % 885,016,022 Source: Moneycentral.com Figures 1 and 2 provide a short-term and longer-term return on investment for each of the firms. The 2007 year-to-date returns (Figure 1) show relatively steep declines after a short run up in April. Figure 2 shows that from year-end 2002, the Anderson s (ANDE) have provided the largest returns of over 7x initial investment 6. The investment peaks for the firms were generally in quarter 2, U.S. Bioenergy Corp. has only been trading since the 4 th quarter 2006 and VeraSun Energy Corporation and Aventine Renewable Energy Holdings have only been trading since the 2 nd quarter

3 Figure 1. Year to Date Investor Returns for Ethanol Producing Firms. Value of $10,000 invested 14,000 13,000 12,000 ANDE, 11,448 11,000 10,000 ADM, 10,369 9,000 8,000 PEIX, 8,187 MGPI, 6,997 7,000 6,000 VSE, 6,958 USBE, 6,677 AVR, 6,112 5,000 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 January 3, 2007 to August 15, 2007 Includes distributions Source: finance.yahoo.com 39

4 Figure 2. Investor Returns for Ethanol Producing Firms: January 2003-August Value of $10,000 invested 110, ,000 90,000 80,000 70,000 ANDE, 76,043 60,000 50,000 MGPI, 49,127 40,000 30,000 ADM, 28,282 20,000 PEIX, 12,792 10,000 USBE, 6,907 VSE, 4,377 - AVR, 3,591 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 January 2, 2003 to August 15, 2007 Includes distributions Source: finance.yahoo.com 40

5 Production Inputs Corn The seven-year historical production for the four National Agricultural Statistics Service (NASS) districts surrounding Champaign County is shown in table 4. Corn production has ranged from 698 to 980 million bushels over the past seven years. The 100 million gallon ethanol plant would require approximately 35 million bushels or 4 to 5% of this production. Table 4. East Central Illinois Area Corn Acreage, Yield and Production State Harvested Acres (000s) 40 Central IL 1,526 1,510 1,513 1,554 1,605 1,678 1, East IL 1,554 1,509 1,515 1,572 1,604 1,657 1, Southeast IL 1,515 1,485 1,472 1,461 1,571 1,595 1,468 West Central IN Total 5,281 5,209 5,165 5,286 5,467 5,663 5,341 Yield 40 Central IL East IL Southeast IL West Central IN Total Production (000 bu) 40 Central IL 242, , , , , , , East IL 225, , , , , , , Southeast IL 222, , , , , , ,833 West Central IN 99, ,688 93, , , , ,123 Total 790, , , , , , ,962 Source: National Agricultural Statistical Service (NASS) Natural Gas Natural gas prices have increased during the past year and are a significant cost driver in the production of ethanol. In January 2007, the average price of natural gas in Illinois was $9.59 per thousand cubic feet (mcf) sold to industrial consumers. Illinois has been historically at or above the U.S. price of natural gas (Figure 3). 7 The model described in this case study indicates than an increase in the natural gas price of $1/mcf results in an approximate increase of $0.032 per gallon of ethanol produced. 7 Using a conversion of 1 mcf = therms (1 therm = 100,000 BTUs), the cost per 1,000,000 BTU is x $/mcf. 41

6 Figure 3. U.S. and Illinois Natural Gas Prices Sold to Industrial Consumers. Natural Gas Industrial Price $/mcf Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 United States Illinois Source: Energy Information Administration (EIA), Electricity Electricity prices for Illinois are also above other states in the Midwest. The average industrial and commercial prices for December 2006 are $0.047 and $0.079 / KWH respectively (Energy Information Administration, Form EIA 826). The model presented in this report indicates that an increase in the price of electricity of $0.01/KWH translates to approximately $0.007 per gallon of ethanol produced. Denaturant Wholesale gasoline is often used as the denaturant in ethanol production. The Illinois average bulk price of gasoline excluding taxes in 2006 was $1.85 gallon (Energy Information Administration). The plant in this study assumes a 2% gasoline blend, hence a $0.10 increase in the price of gasoline would result in a $0.002 increase per gallon of ethanol produced. Chemical Costs The other major input costs are chemicals, yeast, enzymes and water. These production costs represent approximately $0.10 per gallon of ethanol produced. Eidman s estimates for these costs are shown in Table 5. 42

7 Table 5. Chemical Costs per Gallon of Ethanol Chemical Costs Per gallon Enzymes $ Yeasts $ Other Proc.Chemicals & Antibiotics $ Boiler & Cooling Tower Chemicals $ Water and water treatment $ Other Costs Labor The number and average of salaries for the proposed plant are provided in table 6. It is assumed the plant will employ 39 people. The production positions assume four shifts of four positions. The maintenance positions include a manager, boiler operator, welder, two electricians and two additional workers. The laboratory includes a professional and an assistant. The material handlers include rail and truck attendants, grain samplers and two additional workers. The administrative area includes a general manager, plant manager, commodity specialists, and general bookkeepers and administrative assistants. Table 6. Estimated Labor Costs Labor Costs Position Number Average Salary and Benefits Total Cost Production 16 $ 68,000 $ 1,088,000 Maintenance 7 72, ,000 Laboratory 2 80, ,000 Material Handlers 9 30, ,000 Administration 5 90, ,000 Total 39 $ 2,472,000 Other Overhead Expenses Other overhead costs are identified in Table 7. These costs include marketing, maintenance, property taxes, insurance, professional fees, and general operating costs. The organizational structure of the proposed plan permits income taxes to be paid by stockholders through dividends. 43

8 Table 7. Other Overhead Costs Other Costs Per gallon Maintenance and Repairs $ Real Estate Taxes $ Licenses Fees and Equipment $ Sales, General and Administrative Costs $ Total Other Costs $ Income tax rate 0% Capital Requirements The plant costs provided by the construction firm for the capital equipment and installation are $153 million. Site preparation includes dirt work, construction of access points, natural gas/ electricity connections, rail ladder tracks/ switches, and land purchase. Costs for site preparation are identified in Table 8. It is assumed the plant operates at 100% of nameplate construction capacity. Table 8. Site Preparation Costs Capitalized Site Costs Improvements $ 1,500,000 Utilities 1,500,000 Rail 2,500,000 Land 1,000,000 Total $ 6,500,000 Other costs associated with construction include additional engineering fees ($0.9 million), construction management and procurement fees ($9 million), and organizational costs and legal fees ($3.7 million) including equity capital acquisition costs. A 2% or $3.9 million contingency is provided to allow for unexpected costs incurred during construction and installation. Production expenses and start-up costs are needed during the construction phase. The start-up costs and initial loan fees are estimated to be $3.3 million. A month of operating expenses is approximately $16 million. An additional $2.0 million of interest will be needed to account for the 18 month construction and operating expenditures. Table 9 provides a summary of capital costs and sources and uses of capital. The cash flow needs and sources of funds for the construction phase of the project are identified in table 10. It is assumed that all of the equity is used prior to acquiring debt funds. 44

9 Table 9. Capital Costs and Sources and Uses of Capital Sources and Uses of Funds Statement Sources % of total Uses EPC Contract $ 153,000,000 Term Loan $ 99,246,586 Start-up operating costs and 50% loan fees 3,300,000 Cash Equity $ 98,000,000 50% Working Capital Investment 16,000,000 Engineering expense 900,000 Construction mgt & procurement fees 9,000,000 Construction contingency 3,600,000 Site prepartion 5,500,000 Organization costs 3,700,000 Interest on startup debt 1,246,586 Land 1,000,000 Total Sources $ 197,246, % Total Uses $ 197,246,586 Finance Terms and Covenants Financing will be provided by an international bank that has coordinated a three-bank loan syndicate. The terms of the loan include a cost of 3.00% above London Interbank Offer Rate (LIBOR) with a 1% facility fee. The baseline case assumes an interest rate of 8.00%. The amortization period is assumed to be 10 years with a bullet maturity at the end the seventh year. Payments are due quarterly. The loan covenants required by the syndicate include the following items. 1. The principal amount of the loan should never exceed 65% of the total project cost. 2. A cash flow sweep provision requires that 25% of excess cash generated will be added to the scheduled payment of the loan. Excess cash is calculated as earnings before interest, taxes, depreciation and amortization (EBITDA) less capital expenditures and scheduled debt service. The cash sweep provision is not required after the loan to initial costs falls below 30%. 3. There must be a minimum of six months of debt service held in cash reserves. 4. Maximum capital expenditures are 0.5% of initial project costs. One year of carry over is allowed. 5. Maximum debt to net worth is 1.5 after construction. 6. Minimum debt service ratio is Dividends are limited to 50% of excess cash flows and can not be made prior to completion of the plant. 45

10 Table 10. Construction Phase Sources and Uses of Funds Cash Flow Projections during Construction Phase Enter month of startup Startup Month Ending Month Capital Costs 153,000, ,909,091 Site Costs 6,500, ,333 Other Capitalized Costs 17,200, ,075,000 Operating Expenses 3,300, ,333 Month Capital Costs Site Costs Other Capitalized Costs Operating Expenses Accrued Plant Cost Owners Equity Debt Accrued Interest , , , , , , ,075, ,333 1,625,000 1,625, ,333 1,075, ,333 3,316,667 3,316, ,333 1,075, ,333 5,008,333 5,008, ,333 1,075, ,333 6,700,000 6,700, ,333 1,075, ,333 8,391,667 8,391, ,909, ,333 1,075, ,333 23,992,424 23,992, ,909, ,333 1,075, ,333 39,593,182 39,593, ,909, ,333 1,075, ,333 55,193,939 55,193, ,909, ,333 1,075, ,333 70,794,697 70,794, ,909, ,333 1,075, ,333 86,395,455 86,395, ,909, ,333 1,075, , ,996,212 98,000,000 3,996, ,909, ,333 1,075, , ,596,970 98,000,000 19,596,970 26, ,909, ,333 1,075, , ,197,727 98,000,000 35,197, , ,909, ,333 1,075, , ,798,485 98,000,000 50,798, , ,909, ,333 1,075, , ,399,242 98,000,000 66,399, , ,909, ,333 1,075, , ,000,000 98,000,000 82,000, ,662 Total $ 153,000,000 $ 6,500,000 $ 17,200,000 $ 3,300, ,000,000 98,000,000 82,000,000 $ 1,173,258 Working Capital 16,000,000 Accrued Interest 1,173,258 Total Debt $ 99,173,258 46

11 Dividends are based on the minimum of 50% of excess cash flow or 12.5% on initial equity. Management receives a 2% bonus based on net earnings per year. Market Prices The key projection assumptions include price for ethanol, dried distillers grains with solubles (DDGS), and corn. Due to the uncertainty of these prices, alternative scenarios and sensitivity analyses are conducted to evaluate the short and long-run financial performance of the plant. The model also allows other assumptions to be changed to investigate the sensitivity to changing economic conditions. Ethanol The October 2007 net price of ethanol is in the $1.50 to $1.65 range 8. The baseline model assumes a constant price of $1.65 per gallon. However, investors and lenders often evaluate alternative price levels and trends. The model allows performance to be evaluated across alternative prices and changes in prices over time. Corn Price and DDGS Corn price is the largest cost component in the production of ethanol. The baseline analysis will assume $3.25 /bushel. Tyner estimates the price of DDGS as a function of corn and soybean meal prices, using data from 2003 to The estimated equation is: DDGS price ($/ton) = x soybean meal price ($/ton) x corn price ($/bu.). During the more recent increase in corn and soybean meal prices, the relationship does not hold as well. DDGS prices estimated by this model greatly exceed the actual prices observed, hence the price of DDGS is capped at $135 / ton. All scenarios are evaluated based on the corn price and DDGS price linkage with the $135 price per ton ceiling. Other Input Costs It is assumed that all other costs will increase at a 2.5% annual inflation rate. Ten days of receivables and inventory will be kept on hand and accounts payable are paid in seven days. 8 Net price is the spot ethanol price received by the ethanol plant (FOB the plant) and is lower than quoted rack prices. 47

12 Financial Performance Examples of analyses and reports are offered in the Appendix. The analysis includes seven year pro-forma financial statements. The statements are expressed in terms of absolute dollar, per-gallon of ethanol, and per-bushel of corn bases. The per-gallon report is useful in understanding the excess profitability and cash flows relative to the price per gallon of ethanol. It is useful in understanding the cushion the plant has to reductions in ethanol price. The perbushel report helps illustrate the profit remaining on a per-bushel of corn basis. One interpretation of the per-bushel report is the profit and cash flow cushion available on corn price. Two sensitivity reports are included with the analysis. The first report is an analysis that allows the user to change specific prices and costs to evaluate the impact on short term profits (year 1 earnings) and long-term wealth accumulation. Values entered in the Proposed Value column are individually substituted into the model to measure the impact on earnings and wealth accumulation. A matrix of profitability and cash flow outcomes across a range of ethanol and corn prices is provided in the second sensitivity report. The final two reports are break-even reports that illustrate the breakeven levels of corn given specified ethanol prices or break-even levels of ethanol given specified corn prices. Results The baseline results for the plant indicate net earnings after dividends of approximately $4 million or 4% of gross margin in each year the plant is operating at full capacity. The increasing costs resulting from inflation are approximately matched by a decreasing interest cost due to debt repayment. The interest coverage ratios are quite strong, exceeding 2.5x in each full year of operation. The per bushel analysis indicates the income after dividends is approximately $0.12 per bushel of corn. Likewise, the per gallon analysis indicates an approximate $0.04 cushion per gallon of ethanol sold. The marginal impacts report shows that a $10 per ton change in DDGS price results in an approximate $0.025 per gallon change in profit. A $1 increase per 1,000,000 BTU of natural gas would also result in an approximate change in profitability of $0.03 per gallon. An increase of 1% in the cost inflation rate to 3.5% would lead to a decrease of approximately $10 million in total profit over the 7 year time horizon. An increase in interest rates of 100 basis points (1%) decreases net income approximately $1.04 million or per gallon of ethanol produced. One of the most useful reports provided by the model is Corn Price Break Even and Sensitivity Analysis. The shaded regions of the table represent the corn and ethanol price combinations that result in negative values for cash flow to meet debt service and CAPEX or net earnings. Given a $3.50 / bushel corn price, the break even wholesale ethanol price to cover scheduled debt payments and capital purchases would be between $1.60 and $1.70. The Ethanol Price Breakeven report provides more specific break even levels at four 48

13 specified corn prices. For example, at $4.00/bushel corn the wholesale ethanol price needed to cover debt service in year 2 is 1.74 per gallon. The Corn Price Break Even Analysis report provides the corn prices needed to break even and four specified ethanol prices. At $1.80 per gallon ethanol, corn prices exceeding $4.17 would result in inadequate levels of cash flow to meet scheduled debt payments and CAPEX. Historical Price Relationships As demonstrated by this model, the ethanol and corn price volatilities have substantial impact on the profitability and cash flows for the ethanol plant. The relationships between ethanol and corn prices are shown in Figure 4. Another method to demonstrate the ethanol profitability across alternative combinations is to simulate the model based on historical corn, ethanol and DDG prices. Net Earnings at Alternative Price Combination charts show the net earnings and net earnings per ethanol gallon and per corn bushel based on prices observed in Price combinations in mid March and May resulted in the largest projected earnings exceeding $60 million. The lowest projected earnings occurred at the end of September with projected losses exceeding $13 million (corn price 3.45/bushel and ethanol price 1.49/gallon). Figure 3. Corn and Net Ethanol Price Combinations (2007) Corn and Net Ethanol Price Combinations (2007) Ethanol Price/gallon $2.45 $2.25 $2.05 $1.85 $1.65 $1.45 $1.25 Corn Price Ethanol price $4.10 $3.90 $3.70 $3.50 $3.30 $3.10 $2.90 $2.70 $2.50 1/26/2007 2/9/2007 2/23/2007 3/9/2007 3/23/2007 4/6/2007 4/20/2007 5/4/2007 5/18/2007 6/1/2007 6/15/2007 6/29/2007 7/13/2007 7/27/2007 8/10/2007 8/24/2007 9/7/2007 9/21/ /5/ /19/2007 Corn Price/bushel Source: Concluding Comments The case study and financial tool illustrated in this chapter demonstrate the impact on the short- and long-run profitability and financial performance of constructing and operating a dry mill ethanol plant in east central Illinois. Break even prices of corn and ethanol can be derived for the hypothetical ethanol producer. Given conditions and the relationship between corn and ethanol prices prior to September 2007, the profitability and cash flows of an ethanol plant were high. However, considerable price volatility exists in the market. The price situation in October 2007 presents an approximate break even profitability level. Given the volatility of corn, fuel and ethanol prices this tool can be 49

14 updated to provide estimates of the short and longer term profitability of an ethanol producer. Moreover, as lenders and investors change their outlook on investing in ethanol plants, alternative financing plans can also be considered. The tool should be a valuable aid in evaluating price and policy alternatives into the future. 50

15 References Eidman --- Chapter 3. This publication Energy Information Administration, Official Energy Statistics from the U.S. Government < MoneyCentral.com. < (2007). National Agricultural Statistical Service. NASS. Historical data. Online. < (2007). Renewable Fuels Association. Ethanol Biorefinery Locations. < (2007). Tyner, W.E. and F. Thaeripour. Farm Biofuel Policy Alternatives. Paper presented at Biofuels, Food, and Feed Tradeoff Conference, St. Louis, MO. April Tyner W.E., U.S. Ethanol Policy Possibilities for Future, Department of Agricultural Economics, Purdue University, ID-342-W Dow Jones Market Watch. Ethanol makers' downgrades send stocks lower. < May 31, Yahoo. Historical Stock Price Data. Online. <

16 Appendix: Examples of Case Study Reports REVENUES Projected Earnings Dry Mill Ethanol Plant Startup Year 50% Year 50% Year 2 Year 3 Year 4 Year 5 6 Months Ethanol Sales $ 82,500,000 81% $ 165,000,000 81% $ 165,000,000 81% $ 165,000,000 81% $ 165,000,000 81% $ 165,000,000 81% $ 165,000,000 81% Distillers Grain Sales 19,079,209 19% 38,158,418 19% 38,158,418 19% 38,158,418 19% 38,158,418 19% 38,158,418 19% 38,158,418 19% CO2 Sales - 0% - 0% - 0% - 0% - 0% - 0% - 0% Other Sales 0% 0% 0% 0% 0% 0% 0% Total Revenues $ 101,579,209 Baseline Case Study Year 6 Year 7 100% $ 203,158, % $ 203,158, % $ 203,158, % $ 203,158, % $ 203,158, % $ 203,158, % Cost of Corn $ 57,750,000 Gross Margin $ 43,829,209 57% $ 115,500,000 57% $ 115,500,000 57% $ 115,500,000 57% $ 115,500,000 57% $ 115,500,000 57% $ 115,500,000 57% 43% $ 87,658,418 43% $ 87,658,418 43% $ 87,658,418 43% $ 87,658,418 43% $ 87,658,418 43% $ 87,658,418 43% EXPENSES Thermal and Electrical Energy Costs 18,112,500 18% 36,365,625 18% 36,509,766 18% 36,657,510 18% 36,808,948 18% 37,123,275 18% 37,453,516 18% Chemical Costs 6,850,000 7% 14,042,500 7% 14,393,563 7% 14,753,402 7% 15,122,237 7% 15,887,800 8% 16,692,120 8% Labor 1,236,000 1% 2,533,800 1% 2,662,074 1% 2,866,762 1% 3,164,369 2% 3,669,698 6% 4,471,171 2% Marketing and Transportation - 0% - 0% - 0% - 0% - 0% - 0% - 0% Maintenance and Repairs 625,000 1% 1,281,250 1% 1,346,113 1% 1,449,617 1% 1,600,106 1% 1,855,632 1% 2,260,907 1% Real Estate Taxes 100,000 0% 205,000 0% 215,378 0% 231,939 0% 256,017 0% 296,901 0% 361,745 0% Licenses Fees and Equipment 200,000 0% 410,000 0% 430,756 0% 463,877 0% 512,034 0% 593,802 0% 723,490 0% Sales, General and Administrative Costs 700,000 1% 1,435,000 1% 1,507,647 1% 1,623,571 1% 1,792,118 1% 2,078,308 1% 2,532,216 1% Management Bonus 118,161 0% 238,891 0% 239,766 0% 237,567 0% 231,521 0% 205,360 0% 164,770 0% Startup costs and loan fees 2,200,000 1,100,000 Total expenses 2,200,000 $ 29,041,661 29% $ 56,512,066 28% $ 57,305,062 28% $ 58,284,244 29% $ 59,487,349 29% $ 61,710,776 30% $ 64,659,936 32% Earnings before interest, taxes, depreciation and amortization (EBITDA) (2,200,000) $ 14,787,548 15% $ 31,146,352 15% $ 30,353,355 15% $ 29,374,173 14% $ 28,171,068 14% $ 25,947,641 13% $ 22,998,482 11% Depreciation and amortization 5,954,733 6% 11,910,940 6% 11,972,882 6% 12,036,373 6% 12,101,452 6% 12,168,157 6% 12,236,530 6% Earnings before interest and taxes (EBIT) (2,200,000) $ 8,832,815 9% $ 19,235,412 9% $ 18,380,473 9% $ 17,337,800 9% $ 16,069,616 8% $ 13,779,484 7% $ 10,761,952 5% Interest expense 4,142,930 4% 7,529,759 4% 6,631,944 3% 5,696,996 3% 4,725,070 2% 3,716,849 2% 2,688,226 1% Earnings before taxes (2,200,000) $ 4,689,885 5% $ 11,705,652 6% $ 11,748,529 6% $ 11,640,803 6% $ 11,344,546 6% $ 10,062,635 5% $ 8,073,726 4% Income taxes - 0% - 0% - 0% - 0% - 0% - 0% - 0% Net earnings (2,200,000) $ 4,689,885 5% $ 11,705,652 6% $ 11,748,529 6% $ 11,640,803 6% $ 11,344,546 6% $ 10,062,635 5% $ 8,073,726 4% Dividends 3,256,656 3% 7,658,284 4% 7,403,620 4% 7,050,487 3% 6,578,040 3% 5,597,887 3% - 0% Retained earnings $ 1,433,229 1% $ 4,047,369 2% $ 4,344,909 2% $ 4,590,316 2% $ 4,766,506 2% $ 4,464,748 2% $ 8,073,726 4% 52